Hurco Companies Inc 10-Q for FY2023 Q2

Hurco Companies Inc (HURC)

10-Q 2023-06-02 For: 2023-04-30

Added on April 09, 2026

About this 10-Q

Hurco Companies Inc filed this 10-Q on June 2, 2023, covering the quarter ended April 30, 2023 (FY2023 Q2).

Headline figures

Quarter ended April 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $53.82M; down 14.3% from $62.83M a year earlier
Net income: $377K; down 81.4% from net income of $2.03M a year earlier
Diluted EPS: $0.06; down 80.0% from $0.30 a year earlier

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Indiana		35-1150732
(State or other jurisdiction of		(I.R.S. Employer Identification Number)
incorporation or organization)

One Technology Way
Indianapolis, Indiana		46268
(Address of principal executive offices)		(Zip code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	HURC	The Nasdaq Stock Market LLC

Large accelerated filer ◻	Accelerated filer ⌧
Non-accelerated filer ◻	Smaller reporting company ◻
Emerging growth company ◻

Part I - Financial Information

Item 1.	Financial Statements

	Condensed Consolidated Statements of Operations Three and Six Months Ended April 30, 2023 and 2022	3

	Condensed Consolidated Statements of Comprehensive Income (Loss) Three and Six Months Ended April 30, 2023 and 2022	4

	Condensed Consolidated Balance Sheets as of April 30, 2023 and October 31, 2022	5

	Condensed Consolidated Statements of Cash Flows Three and Six Months Ended April 30, 2023 and 2022	6

	Condensed Consolidated Statements of Changes in Shareholders’ Equity Three and Six Months Ended April 30, 2023 and 2022	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	30

Part II - Other Information

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 5.	Other Information	31

Item 6.	Exhibits	32

Signatures		33


	Three Months Ended				Six Months Ended
	April 30,				April 30,
	2023		2022		2023		2022

		(unaudited)				(unaudited)
Sales and service fees	$	53,819	$	62,825	$	108,501	$	129,712

Cost of sales and service		41,236		47,223		83,200		97,203

Gross profit		12,583		15,602		25,301		32,509

Selling, general and administrative expenses		11,592		12,515		23,076		24,212

Operating income		991		3,087		2,225		8,297

Interest expense		55		6		71		13

Interest income		85		—		137		53

Investment income, net		7		3		36		181

Other income (expense), net		(360)		(162)		281		(418)

Income before income taxes		668		2,922		2,608		8,100

Provision for income taxes		291		893		901		2,536

Net income	$	377	$	2,029	$	1,707	$	5,564

Income per common share

Basic	$	0.06	$	0.30	$	0.26	$	0.83
Diluted	$	0.06	$	0.30	$	0.26	$	0.83

Weighted average common shares outstanding

Basic		6,486		6,571		6,536		6,594
Diluted		6,516		6,640		6,570		6,641

Dividends paid per share	$	0.16	$	0.15	$	0.31	$	0.29


	April 30,		October 31,
	2023		2022
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	52,155	$	63,922
Accounts receivable, net		34,895		38,444
Inventories, net		175,831		156,207
Derivative assets		172		2,515
Prepaid and other assets		9,443		6,981
Total current assets		272,496		268,069
Property and equipment:
Land		1,046		868
Building		7,392		7,352
Machinery and equipment		28,018		26,532
Leasehold improvements		4,677		4,351
		41,133		39,103
Less accumulated depreciation and amortization		(32,888)		(30,620)
Total property and equipment, net		8,245		8,483
Non–current assets:
Software development costs, less accumulated amortization		7,298		7,302
Intangible assets, net		1,139		1,246
Operating lease - right of use assets, net		8,754		8,460
Deferred income taxes		3,984		3,442
Investments and other assets, net		9,886		9,235
Total non–current assets		31,061		29,685
Total assets	$	311,802	$	306,237
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	45,171	$	40,707
Customer deposits		5,866		4,839
Derivative liabilities		2,277		3,632
Operating lease liabilities		4,081		3,973
Accrued payroll and employee benefits		7,947		10,751
Accrued income taxes		1,801		2,611
Accrued expenses		4,416		5,397
Accrued warranty expenses		1,435		1,426
Total current liabilities		72,994		73,336
Non–current liabilities:
Deferred income taxes		84		67
Accrued tax liability		1,287		1,281
Operating lease liabilities		5,032		4,814
Deferred credits and other		4,700		4,095
Total non–current liabilities		11,103		10,257
Shareholders’ equity:
Preferred stock: no par value per share, 1,000,000 shares authorized; no shares issued		—		—
Common stock: no par value, $.10 stated value per share, 12,500,000 shares authorized; 6,553,673 and 6,645,352 shares issued and 6,462,138 and 6,566,994 shares outstanding, as of April 30, 2023 and October 31, 2022, respectively		646		657
Additional paid-in capital		60,518		63,635
Retained earnings		179,550		179,877
Accumulated other comprehensive loss		(13,009)		(21,525)
Total shareholders’ equity		227,705		222,644
Total liabilities and shareholders’ equity	$	311,802	$	306,237


	Three Months Ended April 30, 2023 and 2022
								Accumulated
	Common Stock			Additional				Other
	Shares			Paid–in		Retained		Comprehensive
(unaudited)	Outstanding	Amount		Capital		Earnings		Income (Loss)		Total
Balances, January 31, 2022	6,607,437	$	661	$	63,404	$	178,172	$	(2,767)	$	239,470
Net income (loss)	—		—		—		2,029		—		2,029
Other comprehensive income (loss)	—		—		—		—		(7,997)		(7,997)
Stock–based compensation expense, net of taxes withheld for vested restricted shares	9,321		1		805		—		—		806
Exercise of common stock options	—		—		—		—		—		—
Stock repurchases	(49,764)		(5)		(1,666)		—		—		(1,671)
Dividends paid	—		—		—		(986)		—		(986)
Balances, April 30, 2022	6,566,994	$	657	$	62,543	$	179,215	$	(10,764)	$	231,651

Balances, January 31, 2023	6,587,694	$	659	$	63,621	$	180,212	$	(11,642)	$	232,850
Net income (loss)	—		—		—		377		—		377
Other comprehensive income (loss)	—		—		—		—		(1,367)		(1,367)
Stock–based compensation expense, net of taxes withheld for vested restricted shares	13,914		1		749		—		—		750
Exercise of common stock options	—		—		—		—		—		—
Stock repurchases	(139,470)		(14)		(3,852)		—		—		(3,866)
Dividends paid	—		—		—		(1,039)		—		(1,039)
Balances, April 30, 2023	6,462,138	$	646	$	60,518	$	179,550	$	(13,009)	$	227,705


	Six Months Ended April 30, 2023 and 2022
								Accumulated
	Common Stock			Additional				Other
	Shares			Paid–in		Retained		Comprehensive
	Outstanding	Amount		Capital		Earnings		Income (Loss)		Total
Balances, October 31, 2021	6,617,717	$	662	$	63,924	$	175,574	$	(1,741)	$	238,419
Net income (loss)	—		—		—		5,564		—		5,564
Other comprehensive income (loss)	—		—		—		—		(9,023)		(9,023)
Stock–based compensation expense, net of taxes withheld for vested restricted shares	33,761		3		1,384		—		—		1,387
Exercise of common stock options	5,437		1		116		—		—		117
Stock repurchases	(89,921)		(9)		(2,881)		—		—		(2,890)
Dividends paid	—		—		—		(1,923)		—		(1,923)
Balances, April 30, 2022	6,566,994	$	657	$	62,543	$	179,215	$	(10,764)	$	231,651

Balances, October 31, 2022	6,566,994	$	657	$	63,635	$	179,877	$	(21,525)	$	222,644
Net income (loss)	—		—		—		1,707		—		1,707
Other comprehensive income (loss)	—		—		—		—		8,516		8,516
Stock–based compensation expense, net of taxes withheld for vested restricted shares	49,874		5		1,206		—		—		1,211
Exercise of common stock options	11,559		1		269		—		—		270
Stock repurchases	(166,289)		(17)		(4,592)		—		—		(4,609)
Dividends paid	—		—		—		(2,034)		—		(2,034)
Balances, April 30, 2023	6,462,138	$	646	$	60,518	$	179,550	$	(13,009)	$	227,705


	April 30, 2023			October 31, 2022
	Balance Sheet	Fair		Balance Sheet	Fair
Derivatives	Location	Value		Location	Value
Designated as Hedging Instruments:
Foreign exchange forward contracts	Derivative assets	$	108	Derivative assets	$	2,273
Foreign exchange forward contracts	Derivative liabilities	$	1,627	Derivative liabilities	$	2,891

Not Designated as Hedging Instruments:
Foreign exchange forward contracts	Derivative assets	$	64	Derivative assets	$	242
Foreign exchange forward contracts	Derivative liabilities	$	650	Derivative liabilities	$	741


					Location of Gain	Amount of Gain
	Amount of Gain (Loss)				(Loss) Reclassified	(Loss) Reclassified
	Recognized in Other				from Other	from Other
	Comprehensive				Comprehensive	Comprehensive
Derivatives	Income (Loss)				Income (Loss)	Income (Loss)
	Three Months Ended					Three Months Ended
	April 30,					April 30,
	2023		2022			2023		2022
Designated as Hedging Instruments:
(Effective portion)
Foreign exchange forward contracts – Intercompany sales/purchases	$	(847)	$	(41)	Cost of sales and service	$	50	$	(77)
Foreign exchange forward contract – Net investment	$	(25)	$	152


	Location of Gain
	(Loss) Recognized	Amount of Gain (Loss)
Derivatives	in Operations	Recognized in Operations
		Three Months Ended
		April 30,
		2023		2022
Not Designated as Hedging Instruments:
Foreign exchange forward contracts	Other income (expense), net	$	(1,109)	$	581


	Foreign Currency		Cash Flow
	Translation		Hedges		Total
Balance, January 31, 2023	$	(11,128)	$	(514)	$	(11,642)
Other comprehensive income (loss) before reclassifications		(470)		(847)		(1,317)
Reclassifications		—		(50)		(50)
Balance, April 30, 2023	$	(11,598)	$	(1,411)	$	(13,009)


	Foreign		Cash
	Currency		Flow
	Translation		Hedges		Total
Balance, October 31, 2022	$	(21,259)	$	(266)	$	(21,525)
Other comprehensive income (loss) before reclassifications		9,661		(1,013)		8,648
Reclassifications		—		(132)		(132)
Balance, April 30, 2023	$	(11,598)	$	(1,411)	$	(13,009)


		Weighted Average
	Stock Options	Exercise Price
Outstanding at October 31, 2022	11,559	$	23.30
Options granted	—		—
Options exercised	(11,559)		23.30
Options cancelled	—		—
Outstanding at April 30, 2023	—	$	-


		Weighted Average Grant
	Number of Shares	Date Fair Value
Unvested at October 31, 2022	273,103	$	32.90
Shares or units granted	146,954		26.40
Shares or units vested	(49,874)		36.23
Shares or units cancelled	(39,916)		40.22
Shares withheld	(11,950)		37.84
Unvested at April 30, 2023	318,317	$	28.27


	Three Months Ended				Six Months Ended
	April 30,				April 30,
	2023		2022		2023		2022

		(unaudited)				(unaudited)
Cash flows from operating activities:
Net income	$	377	$	2,029	$	1,707	$	5,564
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Provision for doubtful accounts		(22)		(107)		62		(193)
Deferred income taxes		149		79		301		65
Equity in (income) loss of affiliates		(232)		(276)		(222)		(390)
Foreign currency (gain) loss		(656)		815		(2,243)		1,182
Unrealized (gain) loss on derivatives		438		(485)		50		(328)
Depreciation and amortization		1,050		965		2,104		1,907
Stock–based compensation		750		806		1,524		1,595
Change in assets and liabilities:		—
(Increase) decrease in accounts receivable		203		3,521		5,954		6,562
(Increase) decrease in inventories		(7,487)		(6,741)		(10,471)		(12,676)
(Increase) decrease in prepaid expenses		548		1,226		(2,656)		5,382
Increase (decrease) in accounts payable		7,450		(111)		2,206		3,751
Increase (decrease) in customer deposits		(102)		(2,211)		713		(2,144)
Increase (decrease) in accrued expenses		(111)		784		(1,927)		(138)
Increase (decrease) in accrued payroll and employee benefits		504		317		(2,804)		(2,240)
Increase (decrease) in accrued income tax		(1,381)		(377)		(980)		880
Net change in derivative assets and liabilities		47		(77)		600		(29)
Other		(574)		(994)		(953)		(438)
Net cash provided by (used for) operating activities		951		(837)		(7,035)		8,312

Cash flows from investing activities:
Proceeds from sale of property and equipment		1		94		1		101
Purchase of property and equipment		(443)		(231)		(657)		(508)
Software development costs		(364)		(295)		(749)		(598)
Other investments		273		—		273		—
Net cash provided by (used for) investing activities		(533)		(432)		(1,132)		(1,005)

Cash flows from financing activities:
Proceeds from exercise of common stock options		—		—		270		117
Dividends paid		(1,039)		(986)		(2,034)		(1,923)
Taxes paid related to net settlement of restricted shares		—		—		(313)		(208)


	April 30,		October 31,
	2023		2022
Purchased parts and sub–assemblies	$	48,551	$	46,796
Work–in–process		19,686		16,539
Finished goods		111,283		96,305
Inventories, gross	$	179,520	$	159,640
Reserve for purchased parts and sub-assemblies		(3,689)		(3,433)
Inventories, net	$	175,831	$	156,207


Remainder of 2023	$	2,422
2024		3,274
2025		1,624
2026		824
2027		628
2028 and thereafter		725
Total		9,497
Less: Imputed interest		(384)
Present value of operating lease liabilities	$	9,113


	Three Months Ended
	April 30,
	2023				2022				$ Change		% Change
Americas	$	18,324	34	%	$	22,409	36	%	$	(4,085)	(18)	%
Europe		29,991	56	%		30,882	49	%		(891)	(3)	%
Asia Pacific		5,504	10	%		9,534	15	%		(4,030)	(42)	%
Total	$	53,819	100	%	$	62,825	100	%	$	(9,006)	(14)	%



	Assets				Liabilities
	April 30, 2023		October 31, 2022		April 30, 2023		October 31, 2022
Level 1
Deferred compensation	$	2,243	$	1,996	$	—	$	—

Level 2
Derivatives	$	172	$	2,515	$	2,277	$	3,632


				Contract Amount at
	Notional	Weighted		Forward Rates in
	Amount	Avg.		U.S. Dollars
Forward	in Foreign	Forward		Contract	April 30,
Contracts	Currency	Rate		Date	2023	Maturity Dates
Sale Contracts:
Euro	12,850	1.0718		13,773	14,265	May 2023 - Apr 2024
Sterling	4,850	1.2114		5,875	6,103	May 2023 - Apr 2024

Purchase Contracts:
New Taiwan Dollar	670,000	29.5060	*	22,707	22,159	May 2023 - Apr 2024



	Notional	Weighted	Contract Amount at Forward Rates in
	Amount	Avg.	U.S. Dollars
Forward	in Foreign	Forward	Contract	April 30,	Maturity
Contracts	Currency	Rate	Date	2023	Date
Sale Contracts:
Euro	3,000	1.0275	3,083	3,333	Nov 2023


						Approximate
				Total Number of		Dollar Value of
				Shares		Shares that
				Purchased as		May Yet Be
				Part of Publicly		Purchased
	Total Number		Average Price	Announced		Under Plans or
	of Shares		Paid per	Plans or		Programs
	Purchased		Share	Programs⁽¹⁾		($ in thousands)⁽¹⁾
February 2023	48,344	$	28.47	48,344	$	26,988
March 2023	91,126	$	27.32	91,126	$	24,494
April 2023	--	$	--	--	$	24,494
Total	139,470			139,470

3.1		Amended and Restated Articles of Incorporation of the Registrant, incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 1997.

3.2		Amended and Restated By-Laws of the Registrant as amended through March 12, 2021, incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on March 12, 2021.

31.1		Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

31.2		Certification by the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

32.1		Certification by the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2023, formatted in Inline XBRL: (i) Condensed Consolidated Statements of Operations; (ii) Condensed Consolidated Statements of Comprehensive Income (Loss); (iii) Condensed Consolidated Balance Sheets; (iv) Condensed Consolidated Statements of Cash Flows; (v) Condensed Consolidated Statements of Changes in Shareholders’ Equity; and (vi) Notes to Condensed Consolidated Financial Statements.

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

	HURCO COMPANIES, INC.


	By:	/s/ Sonja K. McClelland
		Sonja K. McClelland
		Executive Vice President, Treasurer & Chief Financial Officer
		June 2, 2023

Arch
/s/ Gregory Volovic
Gregory Volovic
Chief Executive Officer
June 2, 2023